MVSD Lawyer explains decision to settle

The MVSD lawyer says the settlement is in the best interest of the water district.
By PEGGY SINKOVICH
VINDICATOR TRUMBULL STAFF
WARREN -- The lawyer representing the Mahoning Valley Sanitary District does not think the state attorney general's office will be successful in recovering $2.4 million from Gilbane Building Co.
Atty. Charles Richards wrote a letter Thursday to Attorney General Betty Montgomery stating why the MVSD board entered into a settlement agreement with Gilbane.
"We hope that you are not planning to take the position that the MVSD had no right to defend or even to settle the counterclaim brought against it by Gilbane," Richards wrote.
"We also hope that you will recognize that the recovery action which you brought against Gilbane has effectively been lost and that, even if the appeal is successful, you are not likely to succeed on remand to the United States District Court where Judge George C. Smith has twice dismissed the case for two different and apparently valid reasons."
Responding to letter
Richards said he was responding to Montgomery's letter written to him Wednesday, saying the settlement does not comply with state law, which she says "expressly prohibits any settlement of any claim for money that is the subject of an audit report without the written approval of the attorney general."
She noted that her office was not consulted nor involved in the settlement negotiations.
The district, which supplies water to about 300,000 Mahoning Valley residents, was a party in a lawsuit filed by the attorney general's office on its behalf to recover $2.4 million from the Rhode Island-based Gilbane.
The company filed a countersuit for $260,000 for work it completed.
A federal judge dismissed Montgomery's lawsuit in October. Montgomery says she is appealing.
Even though the judge dismissed the suit filed by Montgomery, Gilbane's countersuit against MVSD remained, Richards said.
He said the board directed him to negotiate a settlement. The board voted this week to settle all claims. In return, Gilbane agreed to drop its bid for the $260,000.
"The settlement which we have made with Gilbane is unquestionably in the best interest of the Mahoning Valley Sanitary District," Richards said.
About the situation
Gilbane was construction manager on MVSD's $50 million capital improvement project until the company was removed from the job after a 1997 special state audit, which concluded Gilbane was being paid for work never performed.
The contract provided for periodic payments to the company, regardless of the progress of work, said William Burgess, a member of the MVSD board. The federal judge, who dismissed the case, said the payments were not illegal, Burgess said.
Montgomery also stated in her letter to Richards that if her lawsuit is successful and she is able to recover money from Gilbane, that money will be returned directly to MVSD customers.
"This statement reveals a shocking lack of understanding of Ohio law on recovery actions of the type you brought against Gilbane," Richards wrote back.
He said Ohio law mandates that any money collected as a result of the lawsuit must go to MVSD.
Montgomery could not be reached.
sinkovich@vindy.com